That the City Council authorize the City Manager to execute Amendments #3 and #4 to the Agreement for Services between the City of La Habra and the Los Angeles County Fire Department.

In February 2005 the City of La Habra (City) and the Los Angeles County Fire Department (LACFD) entered into a 10-year fire service contract (Agreement) for the provision of fire protection services, hazardous materials response, paramedic services, emergency medical treatment services, and other related services. In exchange for these services, the City was assessed an annual fee in accordance with the terms and conditions of the agreement. This fee is paid from the City's General Fund.
 

Prior to its agreement with LACFD in 2005, the City provided these types of public safety fire services to the La Habra community through the City's own municipal Fire Department, which was disbanded once the contract with LACFD commenced. The City also contracts separately with CARE Ambulance to provide trained ambulance operators for two City owned ambulances. CARE ambulance operators work directly with LACFD fire operations out of City owned fire stations and are reliant on LACFD infrastructure in their response to emergency calls.
 

In 2014 the City Council approved a 10-year extension of the original agreement, with this term scheduled to end in February 2025.

LACFD currently provides fire and paramedic services from four City owned fire stations.  Three are original stations that the City operated prior to the LACFD contract, as follows:

As a condition of the original fire services agreement with LACFD in 2005, the City agreed to fund half of the property acquisition and station construction costs for a brand-new fire station, Station 194, on Beach Blvd. The total cost of this project (land acquisition and construction), which was completed in 2010, was approximately $4.55 million, of which the City funded approximately $2.275 million and LACFD paid approximately $2.275 million. While this fire station is owned solely by the City, it is physically located in Los Angeles County in the City of La Mirada at its border with the City of La Habra.
 

The original agreement for fire services included a cost sharing arrangement between the City and LACFD that was subsequently renewed, without change, in 2014 and is currently in place today.  As is detailed in Attachment 1, the current fire resources cost sharing agreement provides for the following:

The result of this current fee sharing arrangement obligates the City to pay for approximately 49 percent of the fire resource costs in La Habra and LACFD to pay for approximately 51 percent of those costs. Based on this fee sharing agreement and using the estimated FY 23/24 resource costs that have been provided by LACFD (Attachment 1), the City was expecting to pay approximately $7.7 million for fire resource costs this fiscal year, with LACFD funding approximately $8.0 million.

After additional fire prevention staff costs of $338,000 and LACFD overhead costs of $2.9 million are added to the cost share formula, the City’s total projected FY 23/24 fire contract costs were estimated at approximately $11 million, with LACFD funding an additional $8.2 million, for a total annual fire services expense of approximately $19.2 million. The estimated $11 million fire services budget in FY 23/24 is approximately 6 percent, or $675,000, more than the $10.3 million final fee that LACFD assessed the City in FY 22/23 for fire services.

It is staff’s understanding that the original terms and conditions of the 2005 fire services agreement, including the cost sharing methodology, was negotiated to not only provide fire services to the City of La Habra, but to also allow LACFD to take advantage of the City’s network of fire stations to provide fire service response to areas within Los Angeles County adjacent to La Habra. These areas include the cities of Whittier, La Mirada, and La Habra Heights, as well as unincorporated areas of Los Angeles County. From discussions with former staff who were involved with the original contract negotiations, this is the primary reason why Station 194 was built, and why LACFD has paid 100 percent of the costs for this station since it went into operation.

Initial Contract Renewal Discussions
City staff contacted LACFD in late 2022 to begin discussions about another long-term fire services contract extension, as the current agreement is scheduled to end in February 2025. During the initial meeting with LACFD staff in January 2023 it was made clear to the City that, while LACFD would like to continue providing fire services to the La Habra community, LACFD would no longer be able to support a cost sharing arrangement with the City due to their own continuing and worsening fiscal budget challenges. LACFD’s initial proposal was that, if the City desired to enter into a new fire services extension with LACFD, then the City would need to fund the full cost of fire resources at all stations, with no LACFD cost share.

Based on the FY 23/24 fee estimates provided by LACFD, and assuming current staffing and resource allocation at all four stations, this proposal would have increased the City’s projected fire services costs from approximately $11 million to $21.9 million, representing a 100 percent increase in annual cost (Attachment 2). Another variation of this proposal suggested the potential removal of fire resources at Station 193 (Attachment 3) as a cost savings measure; however, that still resulted in the City incurring a total annual fire services cost of $16.4 million compared to the City’s final FY 22/23 fee of $10.3 million.

City staff’s response was that this was not a financially feasible proposal based on the City’s historical cost sharing arrangement and due to the limits of the City’s current financial resources and budget capacity. Furthermore, this proposal was not in the spirit of why the existing cost sharing arrangement was originally structured, as LACFD resources from La Habra fire stations are frequently deployed to respond to calls within Los Angeles County jurisdictions. This was contemplated in the original agreement and built into the cost sharing arrangement. The meeting ended with an agreement that additional financial and operational data would be provided to the City for analysis.

In March 2023, staff from both agencies met to further discuss these issues. Based on the data that was provided by LACFD, discussions focused on response times, resource allocation by station, resource costs by station, types of calls, call responses into and out of La Habra to and from surrounding jurisdictions, call response volumes per station, and cost sharing options. There was also an in depth discussion about the origination of this contract, why LACFD had historically funded the operational cost of certain stations, and the construction and purpose of Station 194. Despite this information, LACFD staff reiterated that they are facing significant budget constraints that will not allow them to continue providing the level of cost sharing that has been in place for almost 20 years, and that they would terminate the City’s fire services agreement early if a new funding agreement could not be reached.

Council Direction and Initial Exchange of Cost Proposals
At its April 3, 2023 meeting, City Council reviewed various options regarding fire service provisions and directed staff to attempt to negotiate a renewal and extension of the fire services agreement with LACFD.

Initial City Proposal:
The City’s initial formal proposal was to extend the existing fire services agreement for another 10-year term, starting in February 2025, at the current service levels and cost sharing arrangement (Attachment 1). Staff also requested information regarding the cost to upgrade certain fire stations to provide enhanced paramedic services, as paramedic/medical aid calls make up the vast majority of fire services calls each year in La Habra.

LACFD Counter-Proposal:
In response to the City’s proposal, LACFD provided a counter-proposal in May that would reduce staffing at Station 194 to cut resource cost at that station from $4.1 million in FY 23/24 to approximately $3.2 million, and proposed to split that cost with the City at $1.6 million per agency. Their proposal did; however, reiterate that the City would need to pay 100 percent of all other fire resource costs at stations 191, 192 and 193.

To help control cost, LACFD staff again indicated that the City could consider the removal of fire resources from Station 193. In an earlier discussion, LACFD staff observed that La Habra was more appropriately sized for three fire stations, rather than four. While the removal of fire resources at Station 193 would likely result in longer response times and could impact the City's ability to respond quickly to emergencies, LACFD indicated that the call responses would still be within their thresholds due to the proximity of the other La Habra Fire stations.

LACFD's final proposal (Attachment 6) assumes the removal of fire resources from Station 193 as early as October 1, 2023, and results in a preliminary estimated annual FY 24/25 fire fee to the City of approximately $14.3 million. This is $4.3 million higher than the City’s FY 22/23 fire budget, and $3.1 million more than the City’s FY 23/24 fire budget. LACFD’s proposal would reduce their annual shared fire costs from $8 million per year to approximately $1.8 million. It should be noted that the estimated FY 24/25 fees will likely be higher due to inflationary cost escalators that will be calculated and provided by LACFD next year.

City Counter-Proposal:
Staff considered the LACFD proposal, as well as the concept of operating a three fire station format (which had been the format in place in La Habra prior to the LACFD contract). Based on LACFD’s stated need to reduce costs, City staff proposed that, rather than closing Station 193, that Station 194 be closed. The rationale expressed to LACFD was that:

Staff further proposed upgrading fire resources at Stations 192 and 193 to provide enhanced paramedic services, and that the City, subject to City Council approval, could fund more of the fire resource costs at Station 193 while keeping the fee sharing arrangements in place at Stations 191 and 192.

The City’s proposal (Attachment 4) would have resulted in City costs for FY 23/24 increasing to $11.8 million, which is approximately $1.8 million higher than what the City budgeted in FY 22/23, and approximately $800,000 more than what the City had anticipated for FY 23/24. This proposal would have resulted in LACFD's costs being reduced from $8 million per year to approximately $3.6 million. LACFD considered and rejected this proposal citing unacceptable responses times into LA County jurisdictions if Station 194 were to be closed.

City staff asked what LACFD would do with Station 194 should they terminate the fire services agreement with the City. They indicated that they will utilize the provision in the fire services agreement to continue funding and operating Station 194 as an LA County Fire station. The 2005 agreement allows LACFD the use of this facility for free for five years, after which they may continue to lease the facility from the City for an additional six and one half years, for a total of 11½ years after the end of the contract with the City.  It should be noted that, even at reduced staffing levels, LACFD would continue to incur approximately $3.2 million in annual operating cost for Station 194.
 
City Council was provided with a staff report detailing these contract negotiations at its meeting on June 5, 2023. Based on City Council direction at that meeting, staff continued negotiations with LACFD and made its final proposal (Attachment 5). Subject to City Council approval, this proposal would have had the City fund 100 percent of fire resource costs at Stations 191 and 192, would have agreed to allow LACFD to remove fire resources from Station 193, and would have had LACFD continue to pay 100 percent of costs for Station 194. This proposal would have increased the City's fire resources costs for FY 23/24 to $12.1 million, and would have reduced LACFD's costs to $3.4 million. LACFD rejected this proposal as unacceptable and reiterated that their proposal remained as described in Attachment 6, or they would terminate their agreement with the City.

The following are the following terms and conditions for a proposed extension to the City’s fire services agreement with LACFD (Attachment 6). There are two contract amendments that are being proposed. Amendment #3 (Attachment 7) will address changes in service levels in FY 23/24, and Amendment #4 (Attachment 8) will provide for a new cost sharing arrangement and a 10-year extension for fire services, beginning in FY 24/25. The major terms and conditions of both agreements are detailed as follows:

Amendment #3:

If approved, Amendment #3 of this proposal will not materially impact the City’s current FY 23/24 fire services budget; however, it will result in the closure of Station 193 as a fire station by or before December 31, 2023.

Amendment #4 of this proposal, if approved, will provide for a ten-year extension of the City’s fire service agreement with LACFD; however, at a significantly higher cost starting on July 1, 2024. Based on current preliminary estimates, the City’s total annual fire services costs in FY 24/25 will increase to at least $14.3 million. This is $3.1 million more than the current fiscal year budget. This proposal will reduce LACFD’s annual cost from approximately $8.2 million to approximately $1.8 million. If this proposal is not acceptable to the City, LACFD has indicated that they will initiate a one-year contract termination.
 

The following table provides annual budget information for fire and ambulance services from inception of the LACFD contract through FY 22/23, and includes the current FY 23/24 cost estimate based on the current agreement terms, and the preliminary estimate for FY 24/25 based on LACFD’s final proposal:
 

Fiscal Year	LACFD Fire Services Budget	CARE Ambulance Budget	Total Budget for Fire/Ambulance Services
FY2005-06	$5,189,224	$503,712	$5,692,936
FY2006-07	$5,305,818	$572,618	$5,878,436
FY2007-08	$5,750,449	$602,666	$6,353,115
FY2008-09	$5,935,723	$692,750	$6,628,473
FY2009-10	$6,063,812	$680,000	$6,743,812
FY2010-11	$6,232,568	$610,666	$6,843,234
FY2011-12	$6,115,989	$548,410	$6,664,399
FY2012-13	$6,427,221	$635,172	$7,062,393
FY2013-14	$6,684,722	$669,532	$7,354,254
FY2014-15	$6,855,851	$688,318	$7,544,169
FY2015-16	$7,059,303	$707,544	$7,766,847
FY2016-17	$7,349,038	$778,700	$8,127,738
FY2017-18	$7,761,666	$858,508	$8,620,174
FY2018-19	$7,936,510	$925,031	$8,861,541
FY2019-20	$8,761,405	$993,500	$9,754,905
FY2020-21	$9,272,249	$1,150,000	$10,422,249
FY2021-22	$9,993,256	$1,364,760	$11,364,016
FY2022-23 Budget	$10,018,079	$1,405,702	$11,423,781
FY2023-24 Budget	$11,242,093	$1,455,778	$12,697,871
FY 2024-25 Estimated Cost	$14,327,636	$1,500,000	$15,827,636

Based on the FY 23/24 fire services budget for four fire stations, the City's annual cost per fire station is $2.8 million, increasing to $3.2 million when ambulance services are added. If Amendment #4 is approved by Council, the fire services cost paid to LACFD in FY 24/25 for three fire stations will increase the City's annual per fire station cost to approximately $4.8 million, increasing to $5.3 million when ambulance services are added. Staff reviewed fire budget information for several other Orange County cities and found that, on average, the per fire station cost among those jurisdictions was approximately $6 million per year.

While staff is disappointed and concerned that the City is facing the choice of either agreeing to pay more for less service or face the termination of critical fire protection services, there are likely few other options readily available to the City that would compare to the level services that LACFD has proven they can provide, especially as Southern California is in the midst of what could be another dangerous fire season.

The City Attorney's office has assisted with the review of these amendments. Staff recommends that the City Council consider and approve Amendments #3 and #4 of the Agreement for Services between the City of La Habra and the Los Angeles County Fire Department as discussed in this staff report and detailed in Attachment 6.

Goal 2, Objective B: Regularly review and evaluate programs, services, and professional agreements to assess effectiveness and identify opportunities for greater efficiencies and cost containment.
Goal 6, Objective E: Build and maintain partnerships and collaborations with other local government agencies, the business community, local non-profit organizations, and the faith-based community.
Goal 7, Objective C: Provide and maintain quality public services for our residents, businesses, and visitors.